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Home > Consumer prices rise as UK inflation rate hits 1%

Consumer prices rise as UK inflation rate hits 1%

25th October 2016 | Published by Henry

UK inflation rose to 1% in September, up from the 0.6% rate reported in August. The figures, released this week by the Office of National Statistics (ONS), also show that we’re currently at our highest annual rate of inflation since 2014.

Inflation explained

The ONS measures inflation using the Consumer Price Index (CPI), which is basically the rate at which the average shopping basket has increased or decreased over the past year. This basket includes goods and services such as food, housing, clothing, transportation, education and medical care, to name a few.

Right now, the cost of the average shopping basket is rising at a faster rate than we’ve seen in recent years. But bear in mind that, historically, our current level of inflation remains very low, especially when compared to the heights of 5% in 2011. This could indicate there’s still room for inflation to increase further in the coming year.

The below graph shows the trend of UK inflation over the past six years.


What exactly is causing the current rise?

If we take a closer look at our average shopping basket, there are a few notable contributors.  Clothing and footwear prices have jumped up, as is the norm around the winter months, while the cost of fuel, hotels and restaurants has also increased. Governor of the Bank of England, Mark Carney, predicts food prices will soon rise too.


Experts say that the falling value of the pound – down by 18% against the dollar since Brexit – hasn’t had a major impact on inflation yet, though it is likely that this impact will push prices up further before too long.

Unfortunately, they also predict that poorer families will be hit hardest by the rise, due mainly to the fact that benefits are frozen at the moment and will not rise in line with CPI. As a result, these families will lose a bigger portion of their disposable income, as much as £100 per year according to the Institute for Fiscal Studies.

Category: Homepage, Money
This post was written by Henry
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